Archive for November, 2011

AK In The Press: Social Media Important in Financial Services

Wednesday, November 30th, 2011

Perhaps the financial services industry is finally getting it – a majority of respondents to an Ignites (a Financial Times Service) survey indicated that it is important for fund companies to be involved in social media. The complete article can be found by clicking here.

I was asked two questions by the reporter – whether it was important for fund companies to be involved in social media and if so, should they be interactive with the general public. The answer to both questions was a resounding yes.

As I have commented before, the old days of fund companies, or anyone else in the industry for that matter, simply pushing out their message the way they want to – via advertising for example – is no longer effective as a stand alone strategy; although advertising is still a way to promote brand recognition. In today’s 24/7 viral news world, clients and prospects want what they want, when they want it and how they want it.

Social media is an effective way to pull people into your website and to generate interest in your company and your services.

On the second question, the more respondents see that you are listening to them, and in fact taking the time to respond to their comments, the more engaged they will feel. One of the attractive features of social media is that it is a two-way street – it allows you to engage with people – to have lively discussions and even debates. Make people part of the conversation and they will be more inclined to remain interested.

It is good to see that the financial services world is starting to get the advantages of social media – and this is even without mentioning one of my favorite uses of social media – the ability to proactively communicate with and assist in client servicing – back to giving people what they want, when they want it and how they want it.

Dear MF Global Board of Directors:

Tuesday, November 22nd, 2011

Dear MF Global Board of Directors:

What were you thinking? Have you been asleep since 2008? Do you think that just because John Corzine has an impressive resume you should have given him carte blanche to leverage your firm like that? Did you ever consider  the more than 1,000 employees, and their families, that you have now negatively impacted? Where were the institutional and compliance controls that would have alerted you to the co-mingling of client asses with your own? Really?

(I waited a few weeks before I wrote this to cool down … But I  really haven’t!)

These are just a few of the questions that I would like to pose to both the Board and to John Corzine. While I don’t expect them to necessarily think about the rest of the industry before they plan their strategy, what they have effectively done is give all of us who work in the industry another black eye just at the worst possible time – while arguments over the proper level of regulation still abound and the “Wall Street” v. “Main Street” debate intensifies.

What is honestly surprising to me is that this entire affair hasn’t gotten more bad press – because it certainly is a poster child for those that want to regulate Wall Street more and accentuate the divisiveness that now permeates our country. I’m really not sure why this lack of outrage has been the case – especially when the story first broke. The past two weeks has been more explainable, as the scandal at Penn State has made all other stories pale in comparison.

But at some point this story will come back to more prominence. The reputation of John Corzine has probably been tarnished beyond repair; so has to some extent the reputation of Goldman Sachs, as the actions of its former employees always reflect back on the firm. But the saddest thing is that some in the industry have learned little from the events of the past few years – and now thousands of employees and customers are suffering. It is now reported that more than $1.2 billion is missing and may never be recovered.

What were you thinking?

AK In The Press: Managers Challenged To Stand Apart From Rivals

Thursday, November 17th, 2011

Last week I gave a presentation at the IMI Consultants Congress entitled “Top 10 List – Winning  A Finals Presentation.” (See last week’s blog for a recap of the presentation and a link to the full list, which can also be found on the Resources page of my website.)

The following article – Managers Challenged to Stand Apart from Rivals – highlights two of the discussion points my fellow presenter and I spoke about and was printed in today’s FundFire.

Differentiation – One of the audience members mentioned that it was difficult for managers to know who their true peer groups are for comparison sake, and that she felt it was important for the consultant to give the manager this information. In reality, however, it’s almost impossible to do, this since managers are all different, and the goal is not to only put “identical” managers up against each other. Consultants will select managers who they feel would all be equally capable of fulfilling the mandate. Rather than try to compete against the other managers, and highlight differences, it is better to stress why you are different and what your own competitive advantages are.

Often times, if you are perceived as competing against someone as opposed to advocating for yourself, you will lose credibility with the prospect. Manager search and selection is an art more than a science. It is not perfect. So concentrate on what you do well, and you will be successful.

The other topic mentioned in the article is who should attend the presentation. I took somewhat of a contrary view, in that while portfolio managers have always be considered important presenters, in today’s volatile world I feel that it is as important to have continuity – that the person the prospect meets at the finals presentation doesn’t go away but services the account on an on-going basis and is available to the client.

We had a lively discussion, and I think the bottom line conclusion was that each situation must be evaluated on its own merits. I will concede that it is more important that a manager who is a stock picker bring a portfolio manager to the presentation, but a top quality client servicing person should also be there to provide consistency and highlight client service.

Top 10 List – Winning A Finals Presentation

Tuesday, November 8th, 2011

For investment managers, winning a finals presentation is a balance between adapting to the past and being forward-looking, and between presenting general firm information and specifics as relates to this prospect. The top 10 are key points that should be addressed in the presentation – if the client has to ask about these issues, it’s probably too late!

(This list was prepared for a presentation made to the IMI Consultant’s Congress in Stamford, CT)

  • Number 10: Explain any unusual fluctuations in AUM. Differentiate between markets losses  and client terminations, withdrawals and redemptions.
  • Number 9: Describe any process adjustments that you made in reaction to the 2008 financial crisis and this year’s Euro-crises. Where these changes permanent or temporary?
Click here to see the rest of the list.

Fewer Advisors Means …. More Competition?

Tuesday, November 1st, 2011

There have been a lot of headlines lately about the announcements by the wirehouses that they plan to reduce their number of advisors over the next few years. Surprising? No. Necessary? Yes. Behind the headlines, however, there is perhaps another story.

A recent survey by Cerulli Associates Inc. shows that the warehouses’ share of retail assets under management fell from 49.7% in 2007 to 42.8% at the end of 2010. (The warehouses are today defined as Morgan Stanley Smith Barney LLC, Bank of America Merrill Lynch, Wells Fargo Advisors and UBS AG; the above numbers do not include Merrill Edge advisors or Wells Fargo’s Finet channel for independent advisors.) As an aside, the regional brokerages and independents are picking up this market share.

The number of advisors at these firms, during the same time period, declined from almost 57,000 to just under 51,000. Cerulli estimates that 20% of these advisors left by choice and the rest were terminated.

So what do we deduce from these numbers? For one, the warehouses are obviously focusing more on productivity than share numbers; in fact, during this same period of time, the average AUM per advisor increased to $94 million. It no longer makes sense to be the biggest – what makes sense is to the best and most productive. With costs rising – both platform as well as total compensation (health care anyone?) – fewer, more productive advisors, makes business sense.

The implication for advisors is that the human cost aside, this trend actually increases competition. It makes sense to extrapolate that the remaining advisors will be the cream of the crop – the weak links are getting stronger.

The industry is getting smaller – and that is probably a good thing. For the individual advisor, however, this change will make it more competitive, not less – as counter intuitive as that sounds. The public perception of advisors is still negative and the market environment is still tough – these numbers don’t do anything to change that.

Advisors must continue to strive to differentiate themselves and clearly articulate their value-added proposition. After all, there are still more than 50,000 at the wirehouses alone!